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Senators Charles Grassley, R-Iowa, and Max Baucus, D-Mont., the chairman and ranking member of the Senate committee that deals with tax issues, have introduced new, Farm Bureau-supported tax relief legislation. The Heartland Investment and Rural Employment (HIRE) Act of 2004 (S. 2761) includes several tax provisions estimated to save farmers and other small businesses more than $2 billion in taxes over 10 years.

The biggest potential tax savings for farmers would come from the creation of Farm, Fish and Ranch Risk Management (FFARRM) accounts. The accounts would let farmers and ranchers put off paying taxes on up to 20 percent of their income and give them an incentive to save money for financially difficult years.

Another provision would ensure that farmers and ranchers don't have to pay self-employment taxes on income from renting land or on payments they receive from the government for enrolling their land in the Conservation Reserve Program. The Internal Revenue Service broadened its rules in the late 1990s, making farmers' rental income and CRP payments subject to a 15.3 percent self-employment tax while nonagricultural property owners are not required to pay the tax on rental income.

The bill also would extend the number of years farmers have to replace livestock sold due to drought or other natural disaster without having to pay capital gains taxes. They would be able to wait four years to replace the livestock, versus two years under current law.

The HIRE bill also would exclude income averaging from the list of tax choices that can trigger the Alternative Minimum Tax (AMT). Current law allows farmers and ranchers to average their income over three years. However, income averaging can trigger the AMT, which some taxpayers must pay in addition to the regular income tax.

Another provision would create a tax deduction for farmers who make charitable food donations to hunger relief organizations.

Pat Wolff, American Farm Bureau Federation senior director of congressional relations, said even though the bill won’t move this year, "The fact that the chairman and ranking member of the Finance Committee, two of the most important people when it comes to tax issues, have come together to propose this tax relief is significant because it establishes a priority for the next session of Congress." AFBF is asking Farm Bureau members to encourage their senators to co-sponsor the bill to increase its chances of passing when Congress convenes next year and the bill is reintroduced.